March 20, 2011- Gov. Scott Walker's plans to balance the state budget by cutting spending and public workers' take-home pay will slow the state's economic recovery, according to projections by a UW-Madison economist.
An estimated 21,843 jobs will be lost over the next year or two as public agencies and workers are able to spend less in their communities, said Steven Deller, a professor of applied economics who studied the ripple effects of Walker's budget-repair bill and two-year budget proposal.
"That's not just a bump in the road," Deller said. "That's a speed bump."
Walker is trying to erase a projected $3.6 billion, two-year budget deficit through spending cuts and a requirement that public workers pay more toward their retirement and health benefits. He's also pledged to create 250,000 jobs in the next four years.
While Deller said nearly any method of closing the budget gap would carry "economic pain," the path Walker has chosen will pack a punch.
The Republican governor has repeatedly ruled out tax increases, saying they would hurt the business climate, and says the new benefit contributions will prevent the need to lay off thousands of government workers. His spokesman, Cullen Werwie, said it's the right course.
"Certainly, the impact of 1,500 people losing their jobs before June 30 alone, and another 10,000 over the next two years, which would have happened without passage of the budget repair bill, would have a much more negative effect on our economy than the modest pension and health reforms signed into law by Gov. Walker," Werwie said.
Ripple effects studied
Deller's analysis didn't calculate whether job losses would result if the $3.6 billion budget shortfall were fixed with tax increases or a combination of spending cuts and tax increases. Deller said he's had many requests to analyze the job-loss effect of tax increases but has declined since there is no concrete proposal on the table.
His projections are based on the budget repair law, which requires the compensation cuts, and Walker's proposed two-year budget, which cuts spending in areas such as medical care for the poor and elderly, local governments, schools and prisons. The budget repair bill was adopted but is on hold pending a court challenge.